Bitsleuths Start Hunt for Mt. Gox’s Missing Bitcoins

As any caper-film fan can attest, the cops use marked bills to sniff out criminals. Cyber sleuths are trying similar tactics to figure out what happened to Mt. Gox’s missing bitcoins.

Roughly 850,000 of its own and its customers’ bitcoins have vanished, according to the now-collapsed exchange, which said Friday it would file for bankruptcy protection. Mt. Gox, once the dominant bitcoin trading venue, didn’t explain how the bitcoins disappeared. The popular explanation seems to be a theft by malicious hackers.

Mark Karpeles (center), chief executive of Mt. Gox, is escorted as he leaves the Tokyo District Court in Tokyo Friday, when Mt. Gox filed for bankruptcy protection.

Bloomberg News

Can the missing Mt. Gox money be found this way?

Maybe.

Part of the trick is identifying which bitcoin addresses belong to Mt. Gox.

Two bitsleuths at letstalkbitcoin.com, Adam B. Levine and Napoleon Cole, have picked up the trail in 2011, when Mt. Gox chief executive Mark Karpeles apparently moved a large sum of bitcoins from one address to another in a public attempt to demonstrate that Mt. Gox had a lot.

Another source of addresses is Mt. Gox customers themselves: People who deposit bitcoins with the exchange would know the address to which they sent coins; likewise, customers who were able to withdraw from Mt. Gox would be able to see where coins came from. Friday, bitcoiners were swapping addresses in forums like online comment shop Reddit.

(Mt. Gox itself, of course, could make a full public disclosure of the addresses it used, but it so far it hasn’t done so.)

The trickiest part will be finding addresses that account for large sums at Mt. Gox. The exchange is believed to have used a so-called “hot wallet” for day-to-day transactions, an account that’s kept separate from a “cold wallet” used as a sort of savings account.

The bulk of customer withdrawals “may be linked only to recent deposits by other clients (that is, going through a relatively small hot wallet),” says Oleg Andreev, a Paris-based software developer and bitcoin enthusiast. But, he says, given enough data, sleuths might be able to reveal a Mt. Gox address holding a large number of bitcoins—if, for instance, Mt. Gox had to dip into a cold wallet to make a transfer.

Still, the crowdsourcing effort faces plenty of challenges. Given the legal and regulatory haze surrounding bitcoin, customers might be reluctant to divulge their addresses.

And, notes Mr. Andreev, the customers most angry at Mt. Gox—the ones who put cash in and never got bitcoins out—wouldn’t have any source addresses to link to.

“If you deposited dollars to purchase some coins but never withdrew any, then you have no info to contribute,” Mr. Andreev said.